HARMON CURRAN NONPROFIT LAW BLOG

Court Strikes Down FEC Regulation, Setting Up Increased Disclosure of Donors to Many Politically Active 501(c)(4)s

Richard Eisenberg

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August 10, 2018

The decision last Friday in the matter of Citizens for Responsibility and Ethics in Washington (CREW) v. FECmight not have been front page news, but it should attract the attention of politically active 501(c)(4) organizations and their donors. The decision requires 501(c)(4) organizations making independent expenditures (“IEs”) in federal elections to disclose more of their donors than they have previously been required to do under Federal Election Commission (FEC) regulations.

On August 3, Chief Judge Beryl A. Howell of the District Court for the District of Columbia struck down part of a 1980 FEC regulation that set forth reporting requirements for outside groups (other than a political committee) making independent expenditures. The regulation at issue in Crew v. FEC provided that these groups had to disclose the identities of only those donors, if any, who made contributions for the purpose of furthering the specific independent expenditure being reported. Judge Howell found that the FEC, in issuing the regulation, had disregarded “the unambiguous language” of the Federal Election Campaign Act (FECA).

The decision is likely to be appealed, and in the interim much uncertainty remains with respect to the specific disclosure rules for making reportable IEs. But it is clear is that it is no longer safe or prudent for organizations to rely on the now-invalidated regulation’s limitation of disclosure to those donors funding a specific expenditure.

The FEC’s Approach: Before and After Citizens United

FECA sets forth somewhat different reporting requirements for political committees on the one hand and other persons or entities (such as 501(c)(4)s) on the other. Political committees must disclose the name, address, occupation, and employer of each person contributing more than $200 to the committee. By contrast, persons or entities other than political committees are required to file reports with the FEC only if they make IEs–that is, they spend more than $250 in a calendar year on communications that expressly advocate the election or defeat of a clearly identified federal candidate. (A separate set of rules requires disclosure of spending for broadcast ads that run within a narrow pre-election window, “electioneering communications.”) And, in their IE reports to the FEC, under the (now-invalidated) FEC regulation those organizations have been required to identify only those donors, if any, who contributed more than $200 to the organization “for the purpose of furthering the reported independent expenditure.

Prior to the Supreme Court’s 2010 decision in Citizens United v. FEC, only a special class of 501(c)(4) organizations known as MCFL organizations were allowed to make IEs in support of or opposition to any federal candidate, whereas most corporations were prohibited from doing so. During that time, the FEC regulation at issue in CREW v. FEC was of little moment, as it applied only to the relatively few entities, such as MCFL organizations, that were legally permitted to engage in independent expenditure activity. In the years since Citizens United, it has become commonplace for 501(c)(4) organizations to make independent expenditures in federal elections. Because 501(c)(4) organizations are not political committees, they (and their donors) have benefitted from the FEC’s narrower disclosure requirement for groups other than political committees. Only donors who contributed to a 501(c)(4) specifically to support a given communications would have to be disclosed. Needless to say, it was relatively easy for donors to avoid making contributions earmarked for a specific IE.

The Decision in Crew v. FEC

In her decision, Judge Howell granted summary judgment in favor of the plaintiffs, invalidating and vacating the FEC regulation that limited the scope of donor disclosure. She interpreted the law to require outside groups who make IEs to report the identities of anyone contributing more than $200 if the contributions were made for the purpose of furthering any federal independent expenditures (regardless of whether or not it was intended for anyspecific independent expenditure) or otherwise for the purpose of influencing a federal election. Under this decision, a single IE could require the disclosure of many donors.

What Comes Next?

The order is stayed for 45 days, meaning it will not take effect until September 17, 2018. At that point there will be no regulation implementing the underlying statutory provisions unless the FEC acts by issuing an interim regulation. For various reasons, FEC action is highly unlikely.

In the absence of a replacement regulation, or a reversal of Judge Howell’s decision on appeal, the existing regulation will simply disappear. 501(c)(4) organizations making more than $250 in federal independent expenditures will be left with only the language of FECA and Judge Howell’s opinion to guide them with respect to their reporting obligations. Even before September 17, 501(c)(4) organizations and their donors should be aware of the pending rule change, which is likely to apply to reports filed in the waning days of the current election cycle.

In the meantime, advocacy organizations should begin carefully reviewing their solicitation materials and preparing for a new reality in which IE reporting includes the identities of the many more donors who contribute more than $200 annually for political purposes. Given the uncertainty about exactly which contributions will need to be disclosed, organizations making federal IEs should exercise caution and consult with their legal counsel with respect to future fundraising and reporting.

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